Quotes from How Markets Work

By Israel Kirzner (1997)

• the long-run equilibrium of perfect competition is not an appropriate policy target because it does not represent competition at all but an end-state in which competition has been exhausted. #
  EconomicsEquilibrium
• A science of ‘human action’ must be a science of the equilibrative properties of entrepreneur-driven market processes.#
  EconomicsMethodologyEquilibrium
• It is true that Mises did not draw special attention to the mutual learning that must occur during the entrepreneurially-driven process of equilibration. Nor did Hayek emphasise the speculative, entrepreneurial character of the market process. But . . . these two ways of articulating a theory of market process turn out to be two sides of the same coin.#
  EconomicsHistoryEquilibrium
• Once one appreciates the Hayekian insight that an attained state of equilibrium means universal perfect knowledge, it becomes obvious that no model in which perfect knowledge is assumed can be of direct assistance in explaining how an equilibrating tendency might occur.#
  EconomicsMethodologyEquilibrium
• The mere failure of a theoretical picture to replicate with precision all features of the reality it seeks to explain, is not necessarily fatal for the usefulness of that theoretical picture. But mainstream theory filters out of the picture those aspects of reality which are the core of an adequate explanation for market phenomena.#
  EconomicsMethodology
• The success which capitalist market economies display is the result of a powerful tendency for less efficient, less imaginative courses of productive action to be replaced by newly discovered superior ways of serving consumers.#
  Economics
• The social advantage provided by dynamic competition is the incentive it offers for the discovery and correction of earlier entrepreneurial errors. This social advantage does not consist in an assurance of ‘optimal’ allocation of resources. It consists of a systematic process of discovering and correcting entrepreneurial errors, especially errors which have left open opportunities for as yet unexploited mutual gain through trade among market participants. Consequently, departures from the optimality conditions of perfectly competitive equilibrium are not a threat to any relevant notion of economic efficiency.#
  Economics
• The shape of the demand curve facing a producer at a given point in time has virtually nothing to do with the competitive character of the market for his product.#
  EconomicsMonopoly

F.A. Hayek, Individualism and Economic Order (1949)

• The real content of the assertion that a tendency toward equilibrium exists… can hardly mean anything but that, under certain conditions,… the expectations of the people and particularly of the entrepreneurs will become more and more correct.#
  EconomicsEquilibriumExpectations